Traders are betting ForgeRock Inc.’s proposed sale to Thoma Bravo LLC is more likely to go through than not, with a key regulatory decision due in the next day.
Shares of the software provider rose as much as 3.2% to $21.88 on Monday, moving them closer to the private equity firm’s takeover offer at $23.25. The $2.3 billion deal is in focus as the US Justice Department is deciding whether to challenge the case in court, with an Aug. 22 deadline to file a lawsuit.
Read: Thoma Bravo Extends ForgeRock Deal Closing to Forestall DOJ Suit
The gap between ForgeRock’s stock price and the Thoma Bravo offer has narrowed to about $1.50, compared with a gap of $2.05 at Friday’s close, and it briefly hit its lowest level in seven months.
At this point, the market sees the probability that the deal will pass antitrust scrutiny ranging from almost 60% to a bit above 70%, based on calculations using the stock’s potential value without a deal. An informal poll of a half-dozen merger-arbitrage specialists produced a range of estimates for that downside level, from as low as $18 to as high as $20.
The merger is facing an in-depth antitrust review since Thoma Bravo already owns two other cybersecurity firms — Ping Identity Holding Corp. and SailPoint Technologies Holdings Inc. That spurs concern that the combined company would have too much control over cybersecurity software used by large enterprises.
ForgeRock’s gain on Monday came after Broadcom Inc.’s $61 billion takeover of VMWare Inc. — another technology takeover seen at risk from antitrust scrutiny — moved closer to the finish line. The merger was cleared in the UK, while the US Federal Trade Commission’s period for reviewing it passed without a challenge.
That said, the ForgeRock deal still has one of the lowest closing odds among pending private equity transactions in the US, according to data compiled by Bloomberg that uses the average price over the 20 days before the deal announcement.
--With assistance from Brad Skillman and Ellie Roza.
